Horngrens accounting the managerial chapters 11th edition miller nobles test bank

Horngren's Accounting,11e (Miller-Nobles) Chapter 18 Introduction to Managerial Accounting Learning Objective 18-1 1) Managerial accounting focuses on providing information for internal planning and control Answer: TRUE Diff: LO: 18-1 AICPA Functional: Reporting PE Question Type: Concept H2 : Financial Versus Managerial Accounting 2) Financial accounting prepares reports for internal purposes, whereas managerial accounting provides information to external stakeholders Answer: FALSE Diff: LO: 18-1 AICPA Functional: Reporting PE Question Type: Concept H2 : Financial Versus Managerial Accounting 3) Financial statements prepared for investors and creditors often include forward-looking information because they make decisions based on a company's future prospects Answer: FALSE Diff: LO: 18-1 AICPA Functional: Reporting PE Question Type: Concept H2 : Financial Versus Managerial Accounting 4) Managerial accounting reporting by a public firm is required to follow the rules of GAAP and guidelines of the Securities and Exchange Commission Answer: FALSE Diff: LO: 18-1 AICPA Functional: Reporting PE Question Type: Concept H2 : Financial Versus Managerial Accounting 5) A budget is a managerial accounting tool used in the planning process Answer: TRUE Diff: LO: 18-1 AICPA Functional: Reporting PE Question Type: Concept H2 : Financial Versus Managerial Accounting Copyright © 2016 Pearson Education, Inc 6) Financial reporting is typically much more detailed than managerial accounting Answer: FALSE Diff: LO: 18-1 AICPA Functional: Reporting PE Question Type: Concept H2 : Financial Versus Managerial Accounting 7) Which of the following is an objective of managerial accounting? A) to generate a company's financial statements for tax reporting B) to provide information to business managers to assist them in controlling their business C) to provide information to shareholders to assist them with their investment decisions D) to ensure that the reports produced for internal and external business purposes are GAAP compliant Answer: B Diff: LO: 18-1 AICPA Functional: Reporting PE Question Type: Concept H2 : Financial Versus Managerial Accounting 8) Which of the following statements is true of managerial accounting? A) The external stakeholders of a company are the primary users of managerial accounting B) Managerial accounting information is used to help managers plan and control their operations C) An external audit by an independent CPA is required for managerial accounting information D) Managerial accounting information must comply with Generally Accepted Accounting Principles Answer: B Diff: LO: 18-1 AICPA Functional: Reporting PE Question Type: Concept H2 : Financial Versus Managerial Accounting 9) Managerial accounting information for a company is primarily used by A) its customers to understand the pricing of the product B) its creditors to understand the credibility of the business C) its employees to plan and control operations D) its investors to make their investment decisions Answer: C Diff: LO: 18-1 AICPA Functional: Reporting PE Question Type: Concept H2 : Financial Versus Managerial Accounting Copyright © 2016 Pearson Education, Inc 10) Which of the following statements is true of financial accounting? A) It provides information to investors needed for their investment decisions B) It provides forward-looking information needed for managing and delegating operations C) It focuses on detailed reports for parts of the company rather than the whole company D) It focuses on planning and controlling day-to-day operations Answer: A Diff: LO: 18-1 AICPA Functional: Reporting PE Question Type: Concept H2 : Financial Versus Managerial Accounting 11) Managerial accounting includes the planning function Which of the following items would be part of the planning function of a business's managerial accounting? A) comparing actual performance to previously budgeted amounts B) creating detailed budgets C) implementing operational plans D) evaluating results of operations Answer: B Diff: LO: 18-1 AACSB: Analytical thinking AICPA Functional: Reporting PE Question Type: Concept H2 : Financial Versus Managerial Accounting 12) Comparing actual performance to previously budgeted amounts is part of the A) controlling function of managerial accounting B) planning function of managerial accounting C) reporting function of managerial accounting D) organizing function of managerial accounting Answer: A Diff: LO: 18-1 AICPA Functional: Reporting PE Question Type: Concept H2 : Financial Versus Managerial Accounting 13) Which of the following is the primary objective of managerial accounting? A) providing information that managers need to make operational decisions B) providing historical data to investors and creditors C) providing summarized results of operations D) providing information to comply with laws and regulations of government bodies Answer: A Diff: LO: 18-1 AICPA Functional: Reporting PE Question Type: Concept H2 : Financial Versus Managerial Accounting Copyright © 2016 Pearson Education, Inc 14) Which of the following is the primary focus of financial accounting? A) providing information that managers need to make operational decisions B) providing summarized information on operational results to investors and creditors C) providing budgets for future periods D) providing highly detailed information on product lines, regions, and divisions Answer: B Diff: LO: 18-1 AICPA Functional: Reporting PE Question Type: Concept H2 : Financial Versus Managerial Accounting 15) For each of the following, indicate whether the statement relates to managerial accounting (MA) or financial accounting (FA): Statement How reports will affect employee behavior is a concern Summary reports are prepared primarily on the company as a whole, usually on a quarterly or annual basis Relevant information and focus on the future Primary users include investors, creditors, and government authorities There is no requirement to follow GAAP Applies to MA or FA Answer: Statement How reports will affect employee behavior is a concern Summary reports are prepared primarily on the company as a whole, usually on a quarterly or annual basis Relevant information and focus on the future Primary users include investors, creditors, and government authorities There is no requirement to follow GAAP Applies to MA or FA MA FA MA FA MA Diff: LO: 18-1 AICPA Functional: Reporting PE Question Type: Concept H2 : Financial Versus Managerial Accounting Copyright © 2016 Pearson Education, Inc 16) Define planning List and briefly discuss a planning tool that managers can use Answer: Planning is the process of choosing goals and deciding how to achieve them The budget is a common planning tool The budget shows the expected financial impact of decisions and helps identify the resources needed to achieve goals Diff: LO: 18-1 AICPA Functional: Measurement PE Question Type: Concept H2 : Financial Versus Managerial Accounting 17) Management accountability is the manager's responsibility to the various stakeholders of the company to maximize profits Answer: FALSE Explanation: Management accountability is the manager's responsibility to the various stakeholders of the company to wisely manage the resources of the organization Diff: LO: 18-1 AICPA Functional: Reporting PE Question Type: Concept H2 : Management Accountability 18) Managerial accounting provides financial statements that report results of operations, financial position, and cash flows both to managers and to external stockholders Answer: FALSE Explanation: Managerial accounting provides the information needed to plan and control operations Diff: LO: 18-1 AICPA Functional: Reporting PE Question Type: Concept H2 : Management Accountability 19) Management's accountability to its suppliers and vendors is to A) provide products to customers that are safe and free of defects B) obey laws and pay taxes timely C) provide a return on shareholders' investment D) make timely payments and comply with contract terms Answer: D Diff: LO: 18-1 AICPA Functional: Reporting PE Question Type: Concept H2 : Management Accountability Copyright © 2016 Pearson Education, Inc 20) How is the management of a company accountable to its employees? A) The management must provide products that are safe and free of defects B) The management must provide a safe workplace C) The management must ensure that it earns a net positive return on its investments D) The management must ensure the business is environmentally responsible to its community Answer: B Diff: LO: 18-1 AACSB: Interpersonal relations and teamwork AICPA Functional: Reporting PE Question Type: Concept H2 : Management Accountability 21) Management of a company is accountable to for obeying laws and paying taxes A) the natural environment B) its asset vendors C) the securities exchange D) the government Answer: D Diff: LO: 18-1 AICPA Functional: Reporting PE Question Type: Concept H2 : Management Accountability 22) In which of the following ways is the management of a company accountable to its communities? A) making timely interest payments to creditors and dividend payments to investors B) ensuring the company's environmental impact is not harmful to its community C) providing a capital return on the shareholders' investment D) repaying principal and interest to the suppliers Answer: B Diff: LO: 18-1 AICPA Functional: Reporting PE Question Type: Concept H2 : Management Accountability 23) ERP systems can integrate all of a company's functions, departments, and data into a single system Answer: TRUE Diff: LO: 18-1 AACSB: Information technology AICPA Functional: Leverage technology to develop and enhance functional competencies PE Question Type: Concept H2 : Today's Business Environment Copyright © 2016 Pearson Education, Inc 24) is a philosophy of continuous improvement of products and processes A) Just-in-Time (JIT) Management B) Enterprise Resource Planning (ERP) C) Supply Chain Management (SCM) D) Total Quality Management (TQM) Answer: D Diff: LO: 18-1 AACSB: Information technology AICPA Functional: Leverage technology to develop and enhance functional competencies PE Question Type: Concept H2 : Today's Business Environment 25) Which of the following describes a system in which suppliers deliver materials at the time they are needed and finished units are completed when customer orders need to be filled? A) Supply Chain Management (SCM) B) Just-in-Time (JIT) Management C) Enterprise Resource Planning (ERP) D) Total Quality Management (TQM) Answer: B Diff: LO: 18-1 AICPA Functional: Leverage technology to develop and enhance functional competencies PE Question Type: Concept H2 : Today's Business Environment 26) What is Total Quality Management (TQM)? A) a philosophy of supplying customers with superior products and services B) an exchange of information with suppliers and customers to create efficient and effective processes C) a software system that integrates a company's functions, departments, and data into a single system D) a system that speeds the transformation of raw materials into finished products Answer: A Diff: LO: 18-1 AICPA Functional: Leverage technology to develop and enhance functional competencies PE Question Type: Concept H2 : Today's Business Environment 27) An Enterprise Resource Planning system (ERP) A) is a cost management system in which a company produces products just in time to satisfy needs B) requires the implementation of Total Quality Management C) integrates all worldwide functions, departments, and data of a company into a single system D) cannot be implemented in service companies Answer: C Diff: LO: 18-1 AACSB: Information technology AICPA Functional: Leverage technology to develop and enhance functional competencies PE Question Type: Concept H2 : Today's Business Environment Copyright © 2016 Pearson Education, Inc 28) Which of the following correctly describes Just-in-Time (JIT) Management? A) It is a production approach that maintains surplus goods at each stage of manufacture B) It is an inventory purchase approach that seeks purchase discounts on buying large quantities C) It is a cost management approach that focuses on maintaining lean inventory levels D) It is an inventory approach that stockpiles raw materials to protect against supply interruptions Answer: C Diff: LO: 18-1 AICPA Functional: Leverage technology to develop and enhance functional competencies PE Question Type: Concept H2 : Today's Business Environment 29) Which of the following is true of Just-in-Time (JIT) Management? A) It results in more storage and insurance costs B) It is a system in which the company produces products only after receiving an order C) It promotes surplus inventory to prevent production shut-down in case of supply interruptions D) It requires a surplus inventory of finished goods to ensure timely, or just-in-time, delivery to customers Answer: B Diff: LO: 18-1 AICPA Functional: Leverage technology to develop and enhance functional competencies PE Question Type: Concept H2 : Today's Business Environment 30) Which of the following is a philosophy designed to integrate all organizational areas in order to provide customers with superior products and services, while meeting organizational goals throughout the value chain? A) Supply Chain Management (SCM) B) Just-in-Time (JIT) Management C) Enterprise Resource Planning (ERP) D) Total Quality Management (TQM) Answer: D Diff: LO: 18-1 AACSB: Information technology AICPA Functional: Leverage technology to develop and enhance functional competencies PE Question Type: Concept H2 : Today's Business Environment Copyright © 2016 Pearson Education, Inc 31) The entire sequence of activities that add value to a company's products and services is called A) the value chain B) the planning process C) TQM production chain D) Enterprise Resource Planning Answer: A Diff: LO: 18-1 AICPA Functional: Leverage technology to develop and enhance functional competencies PE Question Type: Concept H2 : Today's Business Environment 32) The IMA standards of ethical practice require managerial accountants to maintain their professional competence Answer: TRUE Diff: LO: 18-1 AACSB: Ethical understanding and reasoning AICPA Functional: Reporting PE Question Type: Concept H2 : Ethical Standards 33) The accountant for Myra Lido deliberately recorded operating expenses as operating assets in order to record a higher net income for the company As long as the amount of the misstatement was not material, this would not be considered unethical behavior Answer: FALSE Diff: LO: 18-1 AACSB: Ethical understanding and reasoning AICPA Functional: Reporting PE Question Type: Concept H2 : Ethical Standards 34) The IMA Standards of Ethical Practice include confidentiality, competence, credibility, and integrity Answer: TRUE Diff: LO: 18-1 AACSB: Ethical understanding and reasoning AICPA Functional: Reporting PE Question Type: Concept H2 : Ethical Standards Copyright © 2016 Pearson Education, Inc 35) Which of the following is one of the key standards of ethical practice published by the Institute of Management Accountants (IMA)? A) objectivity B) environmental sensitivity C) technicality D) confidentiality Answer: D Diff: LO: 18-1 AACSB: Ethical understanding and reasoning AICPA Functional: Reporting PE Question Type: Concept H2 : Ethical Standards 36) Seria, Inc has received a bulk order from an overseas client As a result, the reported earnings of this year are expected to be significantly higher than the estimates of financial analysts Joshua, an accountant at Seria, tells this to one of his friends Which of the IMA standards has Joshua violated? A) objectivity B) competence C) confidentiality D) technicality Answer: C Diff: LO: 18-1 AACSB: Ethical understanding and reasoning AICPA Functional: Reporting PE Question Type: Concept H2 : Ethical Standards 37) You did not understand what the term accrual meant and failed to accrue the interest due at the end of the year on the company's bonds Which of the IMA standards appears to have been violated here? A) integrity B) confidentiality C) competence D) objectivity Answer: C Diff: LO: 18-1 AACSB: Ethical understanding and reasoning AICPA Functional: Reporting PE Question Type: Concept H2 : Ethical Standards 10 Copyright © 2016 Pearson Education, Inc Answer: Schedule of Cost of Goods Manufactured Beginning Work-in-Process Inventory Direct Materials Used Beginning Raw Materials Inventory $63,000 Purchases of Raw Materials 270,000 Raw Materials Available for Use 333,000 Ending Raw Materials Inventory (45,000) Direct Materials Used $288,000 Direct Labor 352,500 Manufacturing Overhead Indirect Materials 35,250 Indirect Labor 14,250 Depreciation on Factory Plant and Equipment 18,000 Plant Utilities and Insurance 202,500 Total Manufacturing Overhead 270,000 Total Manufacturing Costs Incurred during the Year Total Manufacturing Costs to Account For Ending Work-in-Process Inventory Cost of Goods Manufactured $18,000 910,500 928,500 (42,000) $886,500 Diff: LO: 18-4 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Application H2 : Calculating Cost of Goods Manufactured 34) Describe the flow of product costs for a manufacturer Answer: The flow of product costs for a manufacturer begins with the purchase of raw materials The manufacturer then uses direct labor and manufacturing overhead to convert these materials into Workin-Process Inventory When the manufacturing process is complete, the costs are transferred to Finished Goods Inventory The cost of the finished goods that the manufacturer sells becomes its Cost of Goods Sold on the income statement Diff: LO: 18-4 AICPA Functional: Measurement PE Question Type: Concept H2 : Calculating Cost of Goods Manufactured 77 Copyright © 2016 Pearson Education, Inc 35) Manufacturing costs flow from Work-in-Process Inventory to Cost of Goods Sold to Finished Goods Inventory Answer: FALSE Explanation: Manufacturing costs flow from Raw Materials Inventory to Work-in-Process Inventory to Finished Goods Inventory Diff: LO: 18-4 AICPA Functional: Measurement PE Question Type: Concept H2 : Flow of Costs Through a Process Costing System 36) The following format represents the flow of costs for all three manufacturing inventory accounts: Beginning balance + Additions - Ending balance = Amount used, manufactured, or sold Answer: TRUE Diff: LO: 18-4 AICPA Functional: Measurement PE Question Type: Concept H2 : Flow of Costs Through a Process Costing System 37) The following information has been provided by New Age, Inc.: Direct Labor Direct Materials Used Raw Materials Purchased Cost of Goods Manufactured Ending Work-in-Process Inventory Corporate Headquarters' Property Taxes Manufacturing Overhead $25,800 10,500 16,820 48,400 11,100 2,000 19,200 Calculate the beginning balance of the Work-in-Process Inventory account A) $92,800 B) $59,500 C) $4,000 D) $44,400 Answer: C Explanation: C) Cost of Goods Manufactured $48,400 Direct Materials Used (10,500) Direct Labor (25,800) Manufacturing Overhead (19,200) Ending Work-in-Process Inventory 11,100 Beginning Work-in-Process Inventory $4,000 Diff: LO: 18-4 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Application H2 : Flow of Costs Through a Process Costing System 78 Copyright © 2016 Pearson Education, Inc 38) A manufacturer produced 10,500 total units The cost of goods manufactured is $81,000 and the cost of goods sold is $67,000 The unit product cost is $6.38 Answer: FALSE Explanation: Cost of goods manufactured / Total units produced = Unit product cost $81,000 / 10,500 = $7.71 Diff: LO: 18-4 AICPA Functional: Measurement PE Question Type: Concept H2 : Calculating Unit Product Cost 39) Unit product costs can be used to measure operating income and determine the cost of Finished Goods Inventory Answer: TRUE Diff: LO: 18-4 AICPA Functional: Measurement PE Question Type: Concept H2 : Calculating Unit Product Cost 79 Copyright © 2016 Pearson Education, Inc 40) Reed Productions has provided the following information for the year: Direct Labor Beginning Work-in-Process Inventory Direct Materials Used Ending Work-in-Process Inventory Manufacturing Overhead $153,000 62,000 269,000 52,800 132,500 During the year, Reed produced 72,960 units of product Calculate the unit product cost (Round your answer to the nearest cent.) A) $7.73 B) $6.63 C) $7.60 D) $8.45 Answer: A Explanation: A) Unit product cost: Cost of Goods Manufactured / Units produced Unit product cost $7.73 per unit Diff: LO: 18-4 AACSB: Application of knowledge AICPA Functional: Reporting PE Question Type: Application H2 : Calculating Unit Product Cost 80 Copyright © 2016 Pearson Education, Inc 41) Evanston Manufacturing, Inc reported the following information for the year: Number of Units Produced Number of Units Sold Cost of Goods Manufactured Cost of Goods Sold Sales Revenue Gross Profit Operating Expense 153,000 62,000 $268,000 52,600 132,000 73,520 727,000 What was the unit product cost? (Round your answer to the nearest cent.) A) $4.32 B) $0.86 C) $0.85 D) $1.75 Answer: D Explanation: D) = $268,000 / 153,000 = $1.75 Diff: LO: 18-4 AACSB: Application of knowledge AICPA Functional: Reporting PE Question Type: Application H2 : Calculating Unit Product Cost Learning Objective 18-5 1) Managerial accounting is used in manufacturing and merchandising companies, but not in service companies Answer: FALSE Diff: LO: 18-5 AICPA Functional: Measurement PE Question Type: Concept H2 : How Is Managerial Accounting Used in Service and Merchandising Companies? (H1) 2) Managerial accounting can be used to calculate costs for service and merchandising companies Answer: TRUE Diff: LO: 18-5 AICPA Functional: Measurement PE Question Type: Concept H2 : How Is Managerial Accounting Used in Service and Merchandising Companies? (H1) 81 Copyright © 2016 Pearson Education, Inc 3) Service companies not have product costs, so they often consider all operating expenses as part of their cost of service Answer: TRUE Diff: LO: 18-5 AICPA Functional: Measurement PE Question Type: Concept H2 : Calculate Cost Per Service 4) A merchandiser does not need to calculate cost per unit because it resells goods that are already manufactured Answer: FALSE Diff: LO: 18-5 AICPA Functional: Measurement PE Question Type: Concept H2 : Calculate Cost Per Service 5) Unit cost per service is calculated by dividing total costs by the total number of services provided Answer: TRUE Diff: LO: 18-5 AICPA Functional: Measurement PE Question Type: Concept H2 : Calculate Cost Per Service 6) Nurix, Inc is a business consulting firm During the month of February, Nurix earned $55,600 of revenues by providing services to 46 clients Operating expenses for February were $9,000 and nonoperating expenses were $4,000 What is the unit cost per service? (Round your answer to the nearest cent.) A) $86.96 B) $195.65 C) $1,208.70 D) $282.61 Answer: B Explanation: B) Diff: LO: 18-5 AACSB: Application of knowledge AICPA Functional: Reporting PE Question Type: Application H2 : Calculate Cost Per Service 82 Copyright © 2016 Pearson Education, Inc 7) Samson, Inc reported the following information for the year: Service Revenue Operating Expenses Net Income Number of Services Provided for the Year $40,000 22,500 17,500 12,000 How much was the unit cost per service? (Round your answer to the nearest cent.) A) $3.33 B) $1.46 C) $1.88 D) $5.21 Answer: C Explanation: C) = $22,500 / 12,000 = $1.88 Diff: LO: 18-5 AACSB: Application of knowledge AICPA Functional: Reporting PE Question Type: Application H2 : Calculate Cost Per Service 8) Fuchsia, Inc provides automobile repair services in the local community The company provides the following information for the month of March: Building Rent Expense Depreciation Expense—Equipment Supplies Expense Utilities Expense $5,100 1,500 9,000 2,450 Fuchsia provided services to 1,400 clients in the month of March and generated $24,000 as revenue How much is the cost per service? (Round your answer to the nearest cent.) A) $12.89 B) $3.64 C) $9.80 D) $6.46 Answer: A Explanation: A) Cost per service = Total costs / Services = $18,050 / 1,400 = $12.89 Diff: LO: 18-5 AACSB: Application of knowledge AICPA Functional: Reporting PE Question Type: Application H2 : Calculate Cost Per Service 83 Copyright © 2016 Pearson Education, Inc 9) Star Health, Inc is a fitness center in Oklahoma City In October, the company earned $550,000 in revenues and incurred the following operating costs from 300 customers: Manager's Salary Gym Rent Depreciation Expense—Equipment Office Supplies Expense Utilities Expense Trainer's Salary $5,400 1,400 7,000 2,450 1,600 22,500 How much is the unit cost per customer? (Round your answer to the nearest cent.) A) $93.00 B) $18.17 C) $1,833.33 D) $134.50 Answer: D Explanation: D) Manager's Salary $5,400 Gym Rent 1,400 Depreciation Expense—Equipment 7,000 Office Supplies Expense 2,450 Utilities Expense 1,600 Trainer's Salary 22,500 Total Operating Expense $40,350 Unit cost per service = $40,350 / 300 customers = $134.50 Diff: LO: 18-5 AACSB: Application of knowledge AICPA Functional: Reporting PE Question Type: Application H2 : Calculate Cost Per Service 84 Copyright © 2016 Pearson Education, Inc 10) Poodle Grooming Salon provides dog grooming services In March, the business groomed 245 dogs, earned $10,300 in revenues, and incurred the following operating costs: Grooming Supplies Expense Wages Expense Utilities Expense Rent Expense Depreciation Expense - Equipment $485 3,260 285 1,200 500 Compute the cost of one grooming (Round to two decimal places.) Answer: Cost of one grooming = Total operating costs / Total number of dogs groomed = ($485 + $3,260 + $285 + $1,200 + $500) / 245 dogs groomed = $5730 / 245 = $23.39 per dog groomed Diff: LO: 18-5 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Application H2 : Calculate Cost Per Service 11) How does a service company calculate unit cost per service? Why managers need to know the unit cost per service? Answer: Unit cost per service is calculated by dividing total operating costs by total number of services provided The unit cost per service helps managers set the price of each service provided Diff: LO: 18-5 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Application H2 : Calculate Cost Per Service 12) Knowing the unit cost per item helps managers set appropriate selling prices Answer: TRUE Diff: LO: 18-5 AICPA Functional: Measurement PE Question Type: Concept H2 : Calculating Cost Per Item 85 Copyright © 2016 Pearson Education, Inc 13) If a merchandising company determines that the unit cost to purchase a product is less than the unit cost to manufacture the product, the company should make a decision to begin manufacturing the product Answer: FALSE Explanation: If a merchandising company determines that the unit cost to purchase an item is more than the unit cost to manufacture the item, the company should make a decision to begin manufacturing the product Diff: LO: 18-5 AACSB: Analytical thinking AICPA Functional: Measurement PE Question Type: Critical thinking H2 : Calculating Cost Per Item 14) Minnetonka, Inc is a merchandiser of stone ornaments The company sold 15,600 units during the year The company has provided the following information: Sales Revenue Purchases (excluding Freight In) Selling and Administrative Expenses Freight In Beginning Merchandise Inventory Ending Merchandise Inventory $554,000 300,000 66,000 14,000 47,000 55,500 What is the unit cost per item sold? (Round your answer to the nearest cent.) A) $19.58 B) $16.57 C) $23.14 D) $20.13 Answer: A Explanation: A) Purchases (excluding Freight In) 300,000 Freight In 14,000 Beginning Merchandise Inventory 47,000 Ending Merchandise Inventory (55,500) Cost of Goods Sold $305,500 Cost per unit sold = $305,500 / 15,600 units = $19.58 Diff: LO: 18-5 AACSB: Application of knowledge AICPA Functional: Reporting PE Question Type: Application H2 : Calculating Cost Per Item 86 Copyright © 2016 Pearson Education, Inc 15) Five Seasons is a merchandiser of packed foods The company provides the following information for the year: Sales Revenue Cost of Goods Sold Operating Expenses Net Income Number of Units Sold $141,000 60,000 66,000 15,000 23,000 How much was the unit cost per item of product sold? (Round your answer to the nearest cent.) A) $5.48 B) $6.13 C) $2.61 D) $100.65 Answer: C Explanation: C) = $60,000 / 23,000 = $2.61 Diff: LO: 18-5 AACSB: Application of knowledge AICPA Functional: Reporting PE Question Type: Application H2 : Calculating Cost Per Item 87 Copyright © 2016 Pearson Education, Inc 16) Kentucky, Inc purchases and sells widgets The following information summarizes the company's operating activities for the year: Selling and Administrative Expenses Purchases Sales Revenue Merchandise Inventory, January Merchandise Inventory, December 31 $5,300 156,000 783,000 2,300 38,800 If the company sold 7,000 units of widgets during the year, how much is the cost for one widget? (Round your answer to the nearest cent.) A) $22.29 B) $17.07 C) $22.61 D) $5.87 Answer: B Explanation: B) Merchandise Inventory, January $2,300 Purchases 156,000 Merchandise Inventory, December 31 (38,800) Total cost of goods sold $119,500 Unit cost per item = $119,500 / 7,000 units = $17.07 Diff: LO: 18-5 AACSB: Application of knowledge AICPA Functional: Reporting PE Question Type: Application H2 : Calculating Cost Per Item 88 Copyright © 2016 Pearson Education, Inc 17) Crabapples, Inc purchases and sells boxes of dried fruit The following information summarizes its operating activities for the year: Selling Expenses Merchandise Inventory on December 31 Merchandise Inventory on January Purchases of merchandise Rent for store Sales commissions Sales revenue $9,800 34,000 46,200 84,000 12,900 7,400 161,500 What is the cost per box of dry fruits if Crabapples sold 4,000 boxes of dry fruit during the year? (Round your answer to the nearest cent.) A) $8.50 B) $40.38 C) $32.55 D) $24.05 Answer: D Explanation: D) Merchandise Inventory on January 1, 2017 $46,200 Purchases of Merchandise 84,000 Merchandise Inventory on December 31, 2017 (34,000) Cost of Goods Sold $96,200 Cost per box = $96,200 / 4,000 boxes = $24.05 Diff: LO: 18-5 AACSB: Application of knowledge AICPA Functional: Reporting PE Question Type: Application H2 : Calculating Cost Per Item 89 Copyright © 2016 Pearson Education, Inc 18) Mason Cabinet Company sells standard kitchen cabinets The following information summarizes Mason's operating activities for the year: Selling and Administrative Expenses Purchases Sales Revenue Merchandise Inventory, January Merchandise Inventory, December 31 $42,750 85,700 154,500 12,500 16,200 Mason sold 950 cabinets during the year Calculate the operating income for the year Compute the unit cost for one cabinet (Round to two decimal places.) Answer: Operating income for the year Mason Cabinet Company Income Statement Year Ended December 31, 20XX Sales Revenue Cost of Goods Sold: Beginning Merchandise Inventory Purchases Cost of Goods Available for Sale Ending Merchandise Inventory Cost of Goods Sold Gross Profit $154,500 $12,500 85,700 98,200 (16,200) 82,000 72,500 Selling and Administrative Expenses Operating Income 42,750 $29,750 Unit cost for one cabinet = Cost of goods gold / Total units sold = $82,000 / 950 cabinets = $86.32 per cabinet Diff: LO: 18-5 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Application H2 : Calculate Cost Per Item 90 Copyright © 2016 Pearson Education, Inc 19) How does a manufacturing company calculate unit product cost? Why managers need to know the unit product cost? Answer: Unit product cost is calculated by dividing cost of goods manufactured by total units produced The unit product cost helps managers decide on the prices to charge for each product to ensure that each product is profitable Diff: LO: 18-5 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Application H2 : Calculate Cost Per Item 20) How does a merchandise company calculate unit cost per item? Why managers need to know the unit cost per item? Answer: Unit cost per item is calculated by dividing total cost of goods sold by total number of items sold The unit cost per item helps managers know which products are most profitable The unit cost per item also helps managers set appropriate selling prices Diff: LO: 18-5 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Application H2 : Calculate Cost Per Item 91 Copyright © 2016 Pearson Education, Inc ... Versus Managerial Accounting 8) Which of the following statements is true of managerial accounting? A) The external stakeholders of a company are the primary users of managerial accounting B) Managerial. .. Financial Versus Managerial Accounting 11) Managerial accounting includes the planning function Which of the following items would be part of the planning function of a business's managerial accounting? ... Concept H2 : Financial Versus Managerial Accounting 15) For each of the following, indicate whether the statement relates to managerial accounting (MA) or financial accounting (FA): Statement How